Southern Power to sell 115 MW biomass plant to Austin Energy

Austin Energy announced April 18 that it has reached an agreement to acquire the Nacogdoches Generating Facility from Southern Power for $460 million. The 115-megawatt facility, located in Sacul, Texas, is fueled with waste wood.

Southern Power began commercial operations at the facility in 2012. According to Southern Power, the plant currently serves electricity needs in Austin, Texas, under a long-term power purchase agreement with Austin Energy. Austin Energy said the purchase will allow it to avoid approximately $275 million in additional costs over the remaining term of the agreement.

“Acquiring the biomass plant relieves our obligation to make escalating capacity payments to a third party and, over time, reduces the associated cost impacts to our customers,” said Jackie Sargent, general manager of Austin Energy. “This transaction is consistent with our efforts to manage our portfolio of generation resources in a responsible and cost-effective manner.”

The transaction is expected to close in mid-2019. According to Southern Power, the $460 million purchase price is subject to customary closing conditions.

Austin Energy said no immediate changes to the operation of the facility are expected after it takes ownership of the plant, and noted the facility’s long-term status will be addressed in the company’s future resource planning efforts.

Austin Energy has set goal to offset 65 percent of its customers’ energy needs with renewable resources by 2027. Last year, wind, solar and biomass energy combined to offset 38 percent of the energy needed to serve Austin Energy’s customers.

Southern Power said Barclays is serving as the financial advisor for the transaction, while Baker Botts is serving as primary legal counsel to Southern Power. Austin Energy said JP Morgan is providing transaction support and Husch Blackwell is serving as outside legal counsel to Austin Energy in connection with the purchase.